Mario Draghi ratcheted up the rhetoric Thursday, saying the European Central Bank would consider dramatic measures, including quantitative easing and negative interest rates, if needed to keep inflation from staying too low for too long.

Financial markets liked what they heard. The euro, which is well above its long-term average, fell against the U.S. dollar, a potential boost to European exporters. Bond yields in southern Europe fell, too.

But did the ECB president really break much new ground?

Not really. The muscular tone aside, all Mr. Draghi did was emphasize that the ECB will use the tools available to it if needed. That’s a little like coaches agreeing to what’s in the playbook during the fourth quarter of a football game.

Besides, the ECB took no action Thursday even though annual inflation, at 0.5%, is far below the ECB’s target of just below 2%. Though some technical quirks like the late timing of Easter this year may have depressed the March figure, inflation looks set to remain under 1% for some time.

For an inflation-targeting central bank like the ECB, that should be a recipe for action, not talk. “If that (easing) bias was not activated by headline inflation at 0.5%, one wonders what will be required to trigger action when inflation is around 1%,” noted RBS economist Richard Barwell.

And the complications of deploying these tools haven’t changed. Buying government and private bonds is hard in the euro zone because there are 18 different national bond markets. A negative rate on bank deposits—basically forcing financial institutions to pay in order to park overnight funds at the ECB—could backfire by draining bank profits.

The first test of Mr. Draghi’s beefed-up easing bias may come on April 30th, when this month’s inflation figures are released.

If it fails to rise, Mr. Draghi may be forced to deliver on his pledge to “act swiftly” to any threat of inflation staying too low for too long.

Otherwise his tough talk will seem like just that: talk.

-By Brian Blackstone

MORNING MINUTES: KEY DEVELOPMENTS AROUND THE WORLD

ECB Open to Further Easing, But Leaves Rates Steady. European Central Bank President Mario Draghi made it clear Thursday the central bank was open to further policy easing and was of one mind on using unconventional measures, if needed, to combat deflationary risks. Mr. Draghi was speaking after the ECB decided to keep its main interest rate unchanged, as expected, at 0.25%, a record low that has been in place since November, despite a recent report that inflation in the euro zone has slid far below the bank’s target of just under 2%. http://on.wsj.com/1sbVKeQ

Draghi Unhappy With IMF’s Easing Advice. Mr. Draghi responded with biting sarcasm Thursday when asked about calls for looser ECB policy from International Monetary Fund Managing Director Christine Lagarde. “I think the IMF has been of recent extremely generous in its suggestions on what we should do or not do,” he said. http://on.wsj.com/1hF3vFt

OECD Warns Euro Area of Higher Deflation Risks. Deflation risks in the euro area have risen and the ECB should keep its interest rates at near zero over the medium term to tackle them, the Organization for Economic Cooperation and Development said in a report Thursday. It called on the ECB to consider “additional nonconventional measures” should deflation risks intensify. http://on.wsj.com/1i4bqIN

Fed’s Stein To Step Down to Return to Harvard. A top Federal Reserve official who has expressed concerns about the possibility that the central bank’s policies could spark financial instability said Thursday he is resigning from his post on May 28. Jeremy Stein, an economics professor at Harvard University, will be returning to Cambridge, Mass. to teach again. http://on.wsj.com/1hEB9et

Jeremy Stein Goes Home With a Long Research Agenda. Mr. Stein has had a big impact on the Fed in just two years as a board governor. Mr. Stein nudged the central bank last year toward an exit on its bond-purchase program and also pushed officials to think more carefully about how bubbles and financial instability should factor into their monetary policy decisions. On the latter point, the Fed still has a lot of work to do and it’s not clear officials will have it all sorted out before some new threat to financial stability emerges http://on.wsj.com/1mO3SB8

Fed’s Fisher: There Are Limits to Forward Guidance. Dallas Fed President Richard Fisher said Friday what the central bank can say about the future of monetary policy is more limited than many recognize. “Those who think we can be more specific in stating our intentions and broadcasting our every next move with complete certainty are, in my opinion, clinging to the myth that economics is a hard science and monetary policy a precise scientific procedure rather than the applied best judgment of cool-headed, unemotional decision-makers,” Mr. Fisher said in the text of a speech to be delivered in Hong Kong. http://on.wsj.com/1hIexdc

Fed’s Williams: First Rate Hike Should Come in Second Half of 2015. San Francisco Fed President John Williams thinks the Fed should start to raise interest rates in the second half of 2015, and then only gradually. “Given the economic outlook, and given also my view that we need accommodative policy relative to historical norms, we need to have relatively low levels of interest rates for quite some time,” he told Reuters in an interview. http://reut.rs/1j1wZNq

Fed Introduces its Friend Ferbus. Wouldn’t it be nice if the Fed had a magical computer model that could tell central bank officials what would happen across the economy if housing prices shot up 10% or oil prices tumbled 15% or the stock market lost half its value or the government announced a trillion-dollar spending program? Fed economists tried to build such a model nearly 20 years ago. It is called FRB/US, or Ferbus to wonks, and its performance has been, well, mixed. http://on.wsj.com/1i5tgv9

What to Watch in Today’s U.S. Jobs Report. The Labor Department’s March jobs report, out at 8:30 a.m. EDT, is expected to show a pick-up in hiring, a welcome sign following a mid-winter lull. Economists surveyed by The Wall Street Journal think the economy added 200,000 jobs last month, up from 175,000 in February and much better than December’s meager gain of 84,000. The unemployment rate is expected to return to 6.6% after ticking up to 6.7% in February. Other recent indicators suggest the economy is thawing, though consumers and businesses remain cautious. http://on.wsj.com/1gSi74G

PBOC: Economic Conditions in a “Reasonable Range.” China’s central bank says current economic conditions are within a reasonable range, though the economy still faces complicated situations. Domestic price levels are basically steady, but growth continues to slow for some other emerging economies, the People’s Bank of China said in a brief statement released Thursday following its quarterly policy meeting. The PBOC also reaffirmed its policy goal of keeping the yuan exchange rate at an appropriate level, while pledging to further push exchange-rate reforms. http://on.wsj.com/1dPCFLU

China Cash Shortage Brings IOUs to Fore. In China’s economic slowdown, businesses are having troubles paying suppliers, and banks are getting shy about lending, so cash is scarce. The notes—a form of IOUs known as acceptance drafts – are increasingly being used instead. Driving the exchange of paper, analysts say, is an unwillingness, or inability, by banks to meet demand for cash loans, especially from smaller companies. “The credit transmission mechanism is breaking, or even broken,” said Leland Miller, president of the China Beige Book, a quarterly survey of Chinese businesses and banks. “Firms are having a difficult time getting access to funding, and for small firms it’s extraordinarily difficult.” http://on.wsj.com/1j61O3P

PBOC Sets Yuan Reference Rate at Six-Month. Low China’s central bank set the yuan’s daily reference rate at the weakest in more than six months to reflect broad gains in the dollar overseas, but traders say it pushed more investors to sell the dollar. http://on.wsj.com/1hbkMrl

BOJ Battle: The Empire Strikes Back. For a year, the Bank of Japan’s new leadership has drawn surprisingly little flack while executing a self-proclaimed aggressive “regime change,” breaking from a decade of more cautious policymaking. Now the repudiated old guard is striking back, publicly ringing alarm bells about the lurking dangers of a massive money-printing program, even while many economists say recent signs of slowdown call for a bigger dose of short-term stimulus. http://on.wsj.com/PvqgRF

BOJ’s Kuroda Will Stick With His Bazooka on 1st Anniversary. Despite concerns a higher sales tax will damage the economy, the Bank of Japan and Gov. Haruhiko Kuroda remain confident that the massive easing program launched a year ago is on track to achieve its inflation goal without any additional measures at next week’s policy meeting. http://on.wsj.com/1h6TnGT

BOJ Beat: Abe Adviser Calls for More Easing to Weaken Yen Should Economy Slump. The Bank of Japan should take additional easing measures to bolster the stock market as well as weaken the yen should the impact of the sales tax increase on the economy be grave, a monetary-policy adviser to Prime Minister Shinzo Abe said. http://on.wsj.com/1ox6Qf6

A New Japan First: Negative Rates. The Bank of Japan’s massive bond-buying binge is creating all sorts of market distortions. The latest: the rate in one funding market fell briefly below zero. In other words, debt has gotten so scarce for non-BOJ buyers that some investors are willing to pay for the privilege of holding government bonds. On March 28, rates fell to negative 0.011% in the “repo market,” where banks and securities dealers can secure funding for a few days or months. Specifically, banks looking to hold Japanese government bonds overnight from March 31 to April 1, had to pay a small premium — of 0.011% — to get those bonds. http://on.wsj.com/1mO98Ve

Big Asset Managers Could Pose Risk to Stability, BOE Official Warns. Big asset managers could pose a risk to the stability of the financial system, a senior Bank of England official warned Friday. In a speech to the London Business School’s asset management conference, the BOE’s executive director for financial stability, Andrew Haldane, said growth of the asset management industry over the past decade means some asset managers are so big that “distress at an asset manager may aggravate frictions in financial markets.” http://on.wsj.com/1hn1xFa

BOE (Sometimes) Showed Mercy to Forgers in 18th, 19th Centuries. People convicted of forging Bank of England notes used to get sent to the gallows. Three hundred people were hanged in Great Britain during the “Restriction Period” of the late 18th and early 19th centuries for forging notes or knowingly passing off fakes as the real thing. But a trove of letters from the BOE’s archives published online Thursday reveals a gentler facet of this bleak history. http://on.wsj.com/1hEKSBr

Czech Central Bank: Weaker Koruna May Be Needed Beyond Early 2015. Czech central bank policy makers remain convinced of the need to maintain a weak koruna for now and are ready to keep it in place even beyond early next year, minutes from the bank’s most recent policy meeting showed Friday.– Dow Jones Newswires.

Turkish PM Calls for Rate Cut. Turkish Prime Minister Recep Tayyip Erdogan Friday called on the central bank to hold an extraordinary meeting in order to cut its benchmark interest rate and boost investment. After his comments, the Turkish lira weakened against the dollar. http://on.wsj.com/1pZ4Urf

Nigeria’s Finance Minister: Central Bank Remains Independent. A month after Nigerian President Goodluck Jonathan suspended central bank head Lamido Sanusi over alleged misconduct, the central bank remains in the hands of a deputy governor, Sarah Alade. Mr. Sanusi’s successor, Godwin Emefiele, will take over in June. In an interview with the Wall Street Journal at a dimly lit café in New York City, Nigeria’s finance minister Ngozi Okonjo-Iweala stressed that the upheaval at the country’s central bank would not undermine monetary policy. “Our central bank remains independent … strong monetary policy will continue,” Dr. Okonjo-Iweala said. http://on.wsj.com/1ox3wRb

FORWARD GUIDANCE

-U.S.Labor Department releases its employment report for March at 8:20 a.m.

The Downward Drift in Inflation-Adjusted Interest Rates: Why? And So What? What if the economy has changed in ways that mean it cannot return to normal levels of unemployment at what were once considered normal levels of interest rates? Two economists writing in the International Monetary Fund’s new World Economic Outlook note that inflation-adjusted interest rates have been coming down for more than three decades and suggests they may remain lower than normal for a very long time. http://on.wsj.com/1dQ1W8t

Emerging Markets Will Grow, Just Not at Such Stellar Pace. Is the recent deceleration in emerging market growth permanent, or just a temporary lull? It’s transitory, the IMF said in a paper published Thursday. But don’t expect a return to the stellar levels seen in recent years. http://on.wsj.com/1fQVb1p

Bernanke Taper Comments Had Big Impact On Emerging Markets. Three economists writing for the Centre for Economic Policy Research found that statements by then Federal Reserve Chairman Ben Bernanke on the possible tapering of the central bank’s stimulus program had a large effect on emerging markets asset prices in 2013, whereas the market largely ignored statements by regional Fed bank presidents. Emerging markets with stronger fundamentals experienced larger stock-market declines, larger increases in credit default swap spreads, and larger currency depreciations than countries with weaker fundamentals. http://www.voxeu.org/article/transmission-fed-tapering-news-emerging-markets

COMMENTARY

The Telegraph’s Ambrose Evans-Pritchard writes that the “ECB’s deflation paralysis drives Italy, France and Spain into debt traps.” He says, “Frankfurt could force down the euro at any time by signaling a determination to do something about its predicament. It has chosen not to do so.”

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